Morthland College

A tax increment finance contract Morthland College signed with the City of West Frankfort in 2013 indicates that while the city can be compelled to provide payment assistance for renovations to the college’s East Oak Street building, it can also collect this money from the college should it leave the building vacant within 15 years of signing the contract.

WEST FRANKFORT — In a nearly half-hour interview on AM radio Wednesday, Tim Morthland, founder of Morthland College and Morthland College Health Services, said that much of his organizations’ financial woes are the result of embezzlement.

Appearing as a guest on WJPF 1340’s The Morning Newswatch, Morthland was interviewed by Tom Miller. Morthland discussed the last year and the struggles his businesses — which Morthland refers to as “guilds” — have had.

“We’ve had a very challenging year,” Morthland said, adding that he still has confidence in the future.

He explained that tuition and federal aid were ways of funding Morthland College, but there needed to be more to make ends meet. Morthland Foundation, a not-for-profit run by Morthland and his team, was established to do just that. He said it is doing “a very nice job” funding the college. He said the other entities — such as Da Vinci Beverages and Morthland College Health Services — were also set up to fund the school “through their gifting.”

Morthland said the trouble began last year when he was informed the college and health services were behind on their taxes.

“In the fall and early winter of (2016) we were apprised that one of the for-profits owed some tax monies and so in an internal accounting discussion we had established we would be paying those taxes, we were on a plan,” Morthland said in the radio interview. He said it was not until the following spring that he learned the tax bills had not been paid.

Morthland said this was a “tremendous surprise,” which led to an internal review led by a new accounting team, which he said revealed that “there is a high likelihood, in fact, of theft that occurred within the for-profits,” namely Morthland College Health Services.

“We have turned these findings, in the form of paper and reports, to the appropriate authorities including the sheriff of the county and also to the FBI.”

Morthland told Miller that so far they have discovered hundreds of thousands of dollars missing, but were told to stop looking by their accounting team that has been representing them with the IRS and the Illinois Department of Revenue.

Morthland College and Morthland College Health Services were both served with liens from the IRS earlier this year for nearly $700,000 in unpaid taxes from last year.

Franklin County Sheriff Don Jones confirmed that Morthland had brought the alleged theft from the college and the health services to his attention Sept. 13. Jones said he deferred it to the FBI.

A representative from the FBI’s Springfield field office said the bureau could neither confirm nor deny any investigation.

During the interview, Miller asked Morthland if it was accurate to say that one or more high-ranking persons at the guilds embezzled money to “stop a $700,000 payment to the internal revenue services.”

“The official charges are at the discretion, of course, of the authorities,” Morthland said. He said he believes “that embezzlement has occurred,” and he said he has “substantial proof.”

“We believe that it is real, it is authenticated and we presented that evidence to the appropriate authority,” Morthland said.

Morthland said there would have been about half a dozen people in his organizations who would have had access to the resources necessary to steal that amount of money. 

“I think part of your question was, do I believe there was collusion, do I believe there was more than one person. I do,” Morthland said in the interview.

Morthland said the alleged theft hurt not only the health services but his college, as well. This, coupled with the investigation from the Department of Education as well as the Illinois Board of Higher Education, put the college “in a tight spot,” he said.

Morthland acknowledged the letter received from DOE in January, putting the college on Heightened Cash Monitoring 2 status, restricting its ability to draw Title IV student aid dollars, also hurt the college financially. Instead of being able to draw down money from DOE to give to students, the school had to spend money on student services first and apply for reimbursement under the HCM2 status.

“What happened was the Department of Education did not participate in the disbursement of funds,” Morthland said.

“We would submit documentation, sometimes 1,000 pages, and they would disburse nothing to us and that has gone on for 10 months,” he said.

During the interview, however, Morthland said Title IV funds were still part of the school’s operational structure.

“We are non-for-profit. We have no state funding and students who elect to choose to use their federal financial aid can at Morthland College and that is one of our funding lines,” he said.

However, in a letter postmarked Sept. 11 to Morthland from Daniel Cullen, IBHE deputy director of academic affairs, Cullen referenced an August letter from the DOE that informed the college that it was cut off entirely from all Title IV funds as part of an emergency action.

In Tuesday’s radio interview, Morthland said the college is still standing and moving forward “through the support of the foundation.”

Morthland said should those federal monies be released, “we would be able to pay the sister organization and the federal government, the IRS, the taxes owed by the college. We would pay every vendor and we would be moving forward in a strong position.”

However, a 10-month freeze has left the school to make hard choices such as cutting faculty and even entire programs — the college eliminated its athletic programs earlier this year, which Morthland said in the radio interview resulted in a significant loss in on-campus enrollment.

Phil McMahon, human resources director, was furloughed in May after working three and a half years for both Morthland College as well as Morthland’s guilds. McMahon said he was told the furlough was because the college could no longer afford his salary, even after he offered to take a temporary 40 percent cut in pay.

He was listening to the radio Tuesday morning and said he was unsure what evidence Morthland could have to prove embezzlement.

“Through May 24 when I left there was no evidence that I was aware of,” McMahon said. “I don’t know why he would make those claims. He says that he has proof. In my time there I never seen any proof of any of that of any of the employees at the administrative level.”

One statement Morthland made was particularly puzzling for McMahon.

During the interview, Miller asked about rumors that some on the college’s coaching staff complained of not getting paychecks. Miller used an example and asked Morthland if he was describing the situation accurately.

“... The check was written to coach Tom (Miller used his own name) from Morthland College and then somebody (other than the payee) took it to a bank and cashed it,” he asked. 

Morthland replied the example was simplistic, but that is what the internal investigation found.

“That is accurate. That is the mode that we have discovered,” Morthland said.

McMahon said he couldn’t make heads or tails of this.

“That made no sense,” he said. “I wasn’t aware of any type of that activity.”

Glenn Poshard, who was Morthand College's president for about two months beginning in February, said he couldn’t make sense of this or the embezzlement claims either. He said he would have had no way to know if it were true or not because, as president of the college, he was never given access to the books.

“I asked for the finances to be turned over to the president’s office and that never took place,” Poshard said Wednesday. Poshard said he never knew where the college’s money came from.

McMahon said he, like many fellow employees, believed strongly in the mission of Morthland College and said he enjoyed the atmosphere of the college up until earlier this year. He said the recent turn of events with the Morthland family of corporations has hurt the Franklin County community.

“It affected 30 or 40 families. One was mine,” McMahon said of the jobs lost. He said he knows he will bounce back, but worries about the others.

“They went from having a steady job, helping the community to the unemployment line,” he said, adding that he doesn’t attribute any of that to theft or embezzlement.

“I find it very unfortunate that (Morthland) felt the need to go public with embezzlement … I hope that he has the proof that he says he does,” McMahon said.

Representatives from Morthland College did not respond to a request for comment.

isaac.smith@thesouthern.com

618-351-5823

On Twitter: @ismithreports

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Isaac Smith is a reporter covering Franklin, Perry and Saline counties.

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